FDI in Iran soars from 1.62% to 11.11% of region’s total

The withdrawal of many financial sanctions in Iran has reopened the county’s economy gates to a stream of new investments. Data from FDI Markets, that monitors cross-border greenfield investment, shows that prior to the lifting of sanctions, Iran was ranked 12th out of the 14 Middle East nations for FDI between January 2003 and December 2015, identifying a market share of 1.62 percent.

Since sanctions were removed this year, Iran has climbed to number three, with a market share of 11.11 percent, placed only behind regional powerhouses the United Arab Emirates and Saudi Arabia.

Sanctions removal will unfreeze billions of dollars of overseas assets and make oil to be sold internationally; a restriction that has charged Iran more than $160 bn in oil revenues since 2012. Despite holding the second largest gas and fourth largest crude oil reserves in the world, Iran has flagged behind other emerging Middle Eastern countries.

Global investment into Iran has been steadily growing since 2013, a year in which the country attracted just three FDI projects. This increased to eight in 2014 and nine in 2015.

It was in the first quarter of 2016, however, that the influence of sanction relief became evident. Iran won 22 FDI projects during the quarter, the highest rate of investment since FDI Markets began recording data in 2003.

Job creation and capital expenditure also rose between 2013 and 2016. Some 352 jobs were created in 2013 with capital expenditure of $79m, rising in 2014 to 2,732 new jobs and capital expenditure of $1.67 bn.

Although 2015 showed a 48 percent increase in capital expenditure overall, the first quarter was notable in failing to attract any FDI projects, in stark contrast to the same period this year.

Predictably, Tehran attracted 36 percent of recorded investments into the country during the first quarter of 2016, and 40 percent of all FDI into Iran since January 2013.

Since the sanctions were lifted the leading sector for investment into Iran has been financial services, which has attracted four investments from separate companies with capital expenditure of $60 m.

The country has also attracted investments from the automotive sector, business services, consumer electronics and textiles, among others.

The principal countries investing in Iran during the period were South Korea and Germany, which together committed to capital expenditure of $2.15bn.

South Korea-based steel producer Pohang Iron and Steel (Posco) has been the single largest investor in Iran this year, with plans to invest $1.6bn to build an integrated steel mill in the Chabahar Free Trade-Industrial Zone by March 2017. The company’s subsidiary Posco Energy also said it had entered a memorandum of understanding with Iran-based PKP to build a 500 megawatt off-gas power plant (using gas generated during steelmaking) nearby.

The upward trend recorded by FDI Markets suggests the economic rebound Iran is experiencing is set to continue. Nineteen investors signaled an interest in future investments in the country, representing an increase of 90 per cent from 2015.